Does Insider Trading Raise Market Volatility?

ByShang-Jin Wei, Julan Du

March 1, 2003

Download PDF

More Formats on IMF eLibrary

Order a Print Copy

More formats on IMF eLibrary

Order a Print Copy

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. The central finding is that countries with more prevalent insider trading have more volatile stock markets, even after one controls for liquidity/maturity of the market and the volatility of the underlying fundamentals (volatility of real output and of monetary and fiscal policies). Moreover, the effect of insider trading is quantitively significant when compared with the effect of economic fundamentals.

Subject: Asset prices, Corruption, Financial institutions, Financial markets, Income distribution, Legal support in revenue administration, National accounts, Prices, Revenue administration, Stock markets, Stocks

Keywords: Africa, anti-insider-trading law, Asset prices, Europe, growth rate, Income distribution, insider trading, insider trading activity, insider trading index, insider trading prohibition, insider trading Sanctions Act, Legal support in revenue administration, market volatility, Stock markets, Stocks, WP

Pages:
42
Volume:
2003
DOI:
https://doi.org/10.5089/9781451847130.001
Issue:
051
Series:
Working Paper No. 2003/051
Stock No:
WPIEA0512003
ISBN:
9781451847130
ISSN:
1018-5941

Loading component...

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

ABOUT

TRAINING

PUBLICATIONS

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers